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| *Ostroff, Fair and Company>>>Investing |
How to calculate these ratios, which i've been told are tools for fundamental analysis ? |
also if anyone can explain these ratios, thanx Earnings per Share 鈥?EPS Price to Earnings Ratio 鈥?P/E Projected Earning Growth 鈥?PEG Price to Sales 鈥?P/S Price to Book 鈥?P/B Dividend Payout Ratio Dividend Yield Book Value Return on Equity Actually all of those are calculated for you in Yahoo finance. Here is an example under key statistics for JNJ. http://finance.yahoo.com/q/ks?s=jnj... EPS, P/E, PEG, P/S, P/B, Dividend payout ratio, Dividend yield, book value, return on equity are all on that page. http://finance.yahoo.com/q/ks?s=jnj... To determine EPS, you need to know the total earnings and the total number of shares outstanding then divide the former by the latter. For JNJ shares outstanding is 2.9 billion. It is on that page. Net income is 10.32 billion also on that page. Net per share is $3.56. The figure on the page is $3.51. What is reported is the diluted eps which includes, I believe, options that are exercisable. PEG is actually not projected growth rate but rather the P/E divided by the projected growth rate. This number is not a true value but a speculation by analysts and may or may not be correct. It should be taken with 3 pounds of salt. Price to sales. Take the total market capitalization (stock price x shares outstanding) and divide by the anual sales. Price to book. Same calculation except you divide by total book value of the company. You of course can perform the same calculation on a price per share basis divided by the book value per share. The answer will be the same. Dividend payout ratio. Divided paid divided by earnings per share. Dividend yield. Dividend paid divided by price per share. Book value per share. Total book value / total shares outstanding. Note on this one. Many if not most companies carry intangibles on their books. This is a book keeping trick to account for money they spent for which they did not receive anything. It is normally included in book value and overstated the actual book value. To determine the amount of intangibles you need to check the balance sheet. For JNJ the intangibles amount to 15 billion out of 70 billion. Or 15 billion out of 39 billion of share holder equity. Return on equity. Divide the earnings per share by the book value per share. Another important ratio that you did not mention but should be considered is debt to equity. If that number is more that about 0.50 the company is carrying a great deal of debt. For some companies such as those involved in finance operations (GE for example with a whopping 3.9 ratio) and public utilities (DUK for example with a 0.77) a high debt to equity is not consider too significant. For a manufacturing company and especially for an airline it can be devastating when the economy turns down because they may not make enough money to service their debt. |
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